Oregon cities to seek legislative OK for pot taxes

By JEFF MAPES

Of The Oregonian

PORTLAND — City officials seeking to levy local taxes on legal sales of marijuana in Oregon plan to take their fight to the state Legislature next year.

The League of Oregon Cities says it will ask legislators to amend the marijuana legalization measure passed by voters two weeks ago to explicitly allow local taxes being sought by at least 70 cities, including Portland and several of its suburban neighbors.

Sponsors of Measure 91 say they will fight the local taxes, which they argue could drive up the cost of legal marijuana to the point that it could encourage pot users to continue buying on the black market.

The fight over marijuana taxation is one of several thorny issues the Legislature may face next year following the passage of Measure 91.

Legislative leaders are considering establishing a special Senate-House committee to consider the regulatory and tax issues swirling around the coming of legal marijuana to Oregon.

“People are going to make all sorts of jokes about having a ‘joint’ committee,” said Rep. Peter Buckley, D-Ashland, the House budget chief. “But I think it's the most efficient way to get some of these issues worked out.”

Aides to both Senate President Peter Courtney, D-Salem, and House Speaker Tina Kotek, D-Portland, said they are considering requests from several legislators to establish a special marijuana committee.

“That's definitely something she is receptive to,” said Kotek's spokesman, Jared Mason-Gere. “She thinks it is pretty important that the implementation of 91 is done properly.”

In addition to the fight over local taxation, legislators may also be asked to decide:

— How localities can opt out of allowing retail sales at all. Measure 91 allows a community to ban sales only through a vote of the people at a general election. The League of Oregon Cities would like to allow city councils and county commissions to make that decision.

— Whether to set tight restrictions on marijuana-infused edibles, such as cookies and candies. Measure 91 leaves that task up to the Oregon Liquor Control Commission, which will regulate recreational sales of the drug.

Scott Winkels, a lobbyist for the League of Oregon Cities, said that while Measure 91 allocates some state marijuana taxes to local governments, it won't be enough for them to reimburse the costs of regulating legal marijuana.

“Nobody's going to call the state of Oregon if (marijuana) smoke is drifting into their yard from a neighbor's house,” said Winkels, arguing that cities have also long claimed that alcohol tax revenues from the state don't cover their costs.

Anthony Johnson, the chief sponsor of Measure 91, said that, if anything, the Legislature needs to make it crystal clear that the taxes approved by so many Oregon cities shouldn't be allowed to stand.

Under Measure 91, producers will be taxed $35 an ounce for the most potent parts of a marijuana plant, $10 an ounce for leaves and $5 for plant starts sold to home growers. The tax rate was deliberately set lower than in Washington to better compete with the black market, Johnson said.

Most of the cities that have approved local taxes opted for a 10 percent sales tax, according to a tally from the League of Oregon Cities. One city, Fairview, approved a 40 percent sales tax with the aim of discouraging retailers from locating there.

Sen. Floyd Prozanski, D-Eugene, said he thinks city officials for the most part know that Measure 91 is clear in outlawing local taxes. Instead, he said, “they're trying to position themselves to come into the Legislature in 2015 and say, ‘Hey let us do it.’”

The league of cities also wants the Legislature to change the way localities are allowed to prohibit retail sales.

Now, the November 2016 general election is the first in which voters could ban retail sales in their city or county. That has upset some city officials, who note that the OLCC could start handing out retail licenses as early as January of that year.

Winkels said this sets up a scenario in which a city could face liability for shutting down an existing business. At a minimum, he'd like to allow earlier elections. Ideally, he said, city and county governing boards should be able to make the decision.

Dave Kopilak, a Portland lawyer who drafted Measure 91, said retailers would be hesitant to open up a business in a community if they knew there was strong political support for banning retail sales.

He said sponsors wanted to restrict votes on retail bans to general elections to ensure that it attracted a strong voter turnout.

Kopilak said he didn't think city or county officials should be able to act on their own to ban marijuana sales. After all, he said, only the voters can decide to ban local sales of alcohol.